Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

The Atlanta Crime Examiner reports that Gene Tell and Kristy Nicole Williams were sentenced last Thursday in the U.S. District Court for the Northern District of Georgia. Tell and Williams, employees of the DeKalb County office of the Georgia Department of Family and Children Services (DFCS), were charged with defrauding the U.S. Department of Agriculture of nearly $600,000. The defendants took the funds through DFCS' electronic benefits transaction (EBT) system.

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Westar Energy, the largest electrical utility in the State of Kansas, announced last week that it will pay former Chief Executive Officer, President and Chairman of the Board, David Wittig $36 million as an arbitration settlement relating to Wittig's compensation contract, as well as $3.1 million in attorney's fees and $2.7 million in stock compensation, according to the Topeka Capital-Journal. Westar's settlement with Wittig follows its settlement in the Spring with its former Vice President of Corporate Strategy, Douglas Lake for $21 million in unpaid compensation and $5.3 million in legal fees. Wittig and Lake claimed Westar violated their employment contracts by terminating them prematurely.

Image source: aggregateresearch.com

The compensation for legal fees was for Wittig's and Lake's defense of a criminal prosecution. In 2003, the men were charged in the U.S. District Court for the District of Kansas with conspiracy, circumventing internal accounting controls and falsifying books and records, honest services fraud, wire fraud, submitting false statements and engaging in monetary transactions derived from an unlawful activity. Their first trial ended in a mistrial in 2004 after the jury could not reach a verdict. They were convicted at their second trial in 2005, but the Eighth Circuit Court of Appeals reversed their convictions last year following the U.S. Supreme Court's decision regarding honest services fraud in U.S. v. Skilling.

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In 2001, Pennsylvania tax attorney Nicholas Panarella, Jr., pled guilty to charges of honest services fraud. Mr. Panarella was alleged to have paid former Pennsylvania State Senator F. Joseph Loeper more than $330,000 as "consulting fees" to take actions which benefitted Mr. Panarella's tax-collection firm.

However, as a result of the Supreme Court's decision in U.S. v. Skilling relating to honest services fraud, the U.S. District Court for the Eastern District of Pennsylvania this week ruled that Mr. Panarella's actions were no longer criminal and that he was entitled to have his conviction reversed by means of a writ of coram nobis (Latin for "the error before us"), according to Philly.com.

Mr. Panarella was disbarred following his 2001 plea. Prior to his conviction, he assisted former Mayor of Philadelphia in recovering $51.9 million in back taxes. Joseph Loeper served 20 months in prison for obstructing a tax investigation.

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The U.S. Supreme Court yesterday denied the petition for certiorari by former international media mogul, Canadian citizen and British Lord, Conrad Moffat Black, as reported in the Washington Post.

Mr. Black was the CEO of Hollinger International, Inc., which owned newspapers worldwide. He was indicted (in an indictment made available by FindLaw which may be viewed here) with other officers and employees of Hollinger in the Northern District of Illinois in November of 2005 on 11 counts, in an original indictment which charged mail fraud conspiracy, wire fraud conspiracy and substantive counts of mail and wire fraud. The counts all referenced the "honest services" fraud statute, 18 United States Code section 1346. Testifying to the vigorousness of his defense, on July of 2007, a jury acquitted Mr. Black on 9 counts but convicted him on three others.

Mr. Black then challenged his convictions on appeal. In June of last year, the Supreme Court handed down its three "honest services" decisions, Skilling v. U.S., Black v. U.S., and Weyrauch v. U.S. In Skilling, the main decision involving former Enron President Jeffrey Skilling, the Court rejected the old "intangible right" to an employee's honest services theory and held that, in order to avoid being unconstitutionally vague, section 1346 applies to bribery or kickback schemes, and not to mere self-dealing by an employee. In Mr. Black's case, the Court unanimously held that the jury had not been properly instructed on honest services fraud at trial, and vacated his convictions and remanded. Then in October of last year, the Seventh Circuit Court of Appeals, in an opinion authored by distinguished Judge Richard Posner, struck two of the three remaining counts against Mr. Black, leaving him convicted on a single fraud count and a count for obstruction of justice. Mr. Black again appealed these two remaining convictions to the Seventh Circuit, which upheld them last December, and then to the Supreme Court, which has now declined to review them. Mr. Black is scheduled to be resentenced on June 24.

Source: McLean's.ca

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New York Senator Joseph L. Bruno was indicted in January of 2009 on eight counts of fraud. A jury in the U.S. District Court for the Northern District of New York acquitted Bruno, who is now 81 years old and the former Republican Majority Leader of the New York State Senate, on five of the remaining charges and deadlocked on the sixth in December of 2009. The charges were based on allegations that Bruno allegedly took approximately $3 million in kickbacks from businesses seeking to do business in New York, as well as labor unions. In particular, Bruno s alleged to have accepted $280,000 in "consulting fees" from companies associated with Loudonville, New York, businessman Jared Abbruzzese. Bruno was sentenced to two years' imprisonment last May, but has remained free pending his appeal in the U.S. Court of Appeals for the Second Circuit.

Now the U.S. Attorney's Office has filed a brief with the Court of Appeals requesting that the dismiss the charges against Bruno and remand his case for a new trial, as reported in the Saratogan. The prosecution argued that Bruno's convictions under 18 United States Code Section 346--the honest services fraud statute--cannot stand following the U.S. Supreme Court's decision in U.S. v. Skilling, the case against former Enron executive Jeffrey Skilling, as the Blog has noted here. However, it maintains that it can obtain another indictment of Bruno under the statute, as amended by Skilling. The government contends that it will be able to prove a quid pro quo if Bruno is ordered retried. Bruno and his counsel have filed a brief with the Court of Appeals arguing that any retrial of Bruno would violate double jeopardy.

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Last week was a good one for public officials charged with Federal crimes. First, the U.S. Attorney's Office for the Southern District of California announced that it would not seek a second trial of former San Diego Councilman Michael Zucchet on alleged honest services fraud charges pursuant to 18 U.S.C. 1346, relating to political contributions from the owner of a strip club, as reported by the Los Angeles Times. Mr. Zucchet was indicted with two other City Council members and an aide in 2003. The government alleged that the Council members had a meeting with a lobbyist for the strip club owner for the alleged purpose of changing the City's "no touch" ordinances relating to strip clubs. The Council members, however, argued that they reported the contributions on their financial disclosure forms. The government's decision was prompted by the U.S. Supreme Court's recent decision in U.S. v. Skilling, No. 08-2349, in which, as we have noted,  the Court held that the "honest services" mail fraud statute, 18 U.S.C. §1346, applies to bribery and kickback schemes, and not to mere "undisclosed self-dealing by a public official or private employee," alone.

Councilman Charles Lewis died before trial. Mr. Zucchet and Councilman Ralph Inzunza were convicted by a jury following trial in July of 2005. However, U.S. District Judge Jeffrey Miller dismissed the jury's guilty verdict on seven counts against Mr. Zucchet. The Judge permitted the government to retry Mr. Zucchet on the two remaining counts. The Ninth Circuit Court of Appeals upheld the district court's ruling on appeal. Mr. Inzunza has also appealed his convictions. Mr. Zucchet resigned from the Council soon after his conviction, and is currently General Manager of the San Diego Municipal Employees Association.

Then, according to the Achorage Daily News, the U.S. Attorney's Office for the District of Alaska announced that it would agree to the dismissal of the honest services fraud conviction of Jim Clark. Mr. Clark was the former Chief of Staff to Alaska Governor Frank Murkowski, a lobbyist and attorney, and was once viewed as the most powerful unelected official in Alaska. The U.S. Attorney's Office announced that Mr. Clark's 2008 guilty plea was to a felony that no longer exists, pursuant to the Supreme Court's Skilling decision. Mr. Clark pled guilty to alleged conspiring with former officials of the defunct oil-field services company Veco Corp. to channel $68,550 in illegal contributions to Governor Murkowski's political campaign -- without the Governor's knowledge. He is expected to be a witness for the government in a possible upcoming trial of State Representative Bruce Weyhrauch on bribery, extortion and conspiracy charges. Mr. Clark's law license, which was suspended following his guilty plea, is expected to be reinstated by the Alaska Supreme Court.

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Canadian citizen Conrad Black, former head of Hollinger International, Inc., and once the third biggest newspaper magnate in the world, was charged in the Northern District of Illinois with diverting corporate funds for his own use and was convicted in July of 2007for "honest services" mail fraud, in violation of 18 U.S.C. s 1846, and obstruction of justice, following a jury trial. On June 24, 2010, the Supreme Court issued an opinion in Black v. U.S., case # 08-876, vacating Black's honest services convictions and remanding his case on the ground that the district court's instruction to the jury on honest services was incorrect. Black was incarcerated at the Federal Correctional Center in Coleman, Florida, and was released on bail two weeks ago after spending two years and four months in prison. He remains in the U.S. pending an appeal to return to Canada.

Lord Black's (he was made a member of the House of Lords of the United Kingdom by Queen Elizabeth II and Prime Minister Tony Blair) legal odyssey aside, he has become an observer and critic of the U.S. criminal justice system. Black has kept a diary, which may be viewed here, regarding his experience in prison. Most recently, on July 31, Black published a letter in Canada's National Post entitled "Conrad Black: My Prison Education." Black does pause to criticize his conviction in passing, citing the "fallibility of American justice." However, Black's letter provides a glimpse into life at the end of the tunnel of the federal criminal justice system. Black discusses his daily calls to his wife and his difficulties in getting updates on his application for bail in prison. He recounts the interest of his fellow inmates in the developments and media attention in his case, and rather poignantly describes the lengthy goodbyes from his friends:

"The Mafiosi, the Colombian drug dealers, (including a senator with whom I had a special greeting as a fellow member of a parliamentary upper house), the American drug dealers, high and low, black, white, and Hispanic; the alleged swindlers, hackers, pornographers, credit card fraudsters, bank robbers, and even an accomplished airplane thief; the rehabilitated and unregenerate, the innocent and the guilty, and in almost all cases the grossly over-sentenced, streamed in steadily for hours, to make their farewells."

"Most goodbyes were brief and jovial, some were emotional, and a few were quite heart-rending. Many of the 150 students that my very able fellow tutors and I had helped to graduate from high school, came by, some of them now enrolled in university by cyber-correspondence."

Black goes on to criticize harsh federal sentencing policies, especially for drug offenders, citing in particular the disparities in the crack cocaine sentencing Guidelines and their disproportionate impact on African-Americans. He also takes the public defender system to task for being subservient to the will of prosecutors, and laments the United Sates' massive prison population and prison industry in comparison with other Western democracies. Black concludes that "America’s 2.4 million prisoners, and millions more awaiting trial or on supervised release, are an ostracized, voiceless legion of the walking dead; they are no one’s constituency."

CTV.ca

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The recap of the trial thus far of former Illinois Governor Rod Blagojevich, from the coverage of the Chicago Tribune's "Blagojevich on Trial" Blog and the Springfield State Journal-Register's Blagojevich trial coverage continues.

Thursday, June 17, 2010: Former Democratic Party fundraiser Joseph Cari testifies that Blagojevich spoke with him about presidential ambitions and getting contributions from businesses in exchange for awarding state business. Cari states that Antoin “Tony” Rezko told him he made decisions as to who got state work. Cari also testifies that he pressured venture capital firm JER, which was seeking to gain an $80 million allocation from Illinois’ teacher’s pension panel, to hire a consultant designated by Rezko, who would be paid a large finder’s fee. The defense gets Cari to admit that Stuart Levine—not Blagojevich—told Cari that JER would not receive the pension investment business unless it hired the consultant. Cari does admit that JER received the allocation even though it did not ultimately hire the consultant. Blagojevich’s attorneys point out that Cari did not tell federal investigators about his alleged conversations with Blagojevich until 82 days after they first contacted him, and attempts to portray Cari as lying to prosecutors in order to obtain a plea deal. Former Illinois Director of Boards and Commissions Jill Hayden testifies that she gave the most weight to recommendations by Rezko and Chris Kelly in selecting candidates to fill State boards. Rezko and Kelly selected five of the nine member Illinois Finance Authority (IFA). Hayden testifies that Rezko also called her and told her Levine needed to be reappointed to the Illinois Teacher’s Retirement System Board. Blagojevich aid Alonzo “Lon” Monk subsequently contacted Hayden and told her not to take any more calls from Rezko because the FBI had tapped his phones. Ali Ata, former head of the IFA, testifies that, in August 2002, he met with Blagojevich, Rezko, Kelly and legislator Jay Hoffman and gave Blagojevich $25,000 in return for a position in the administration. He states that gave Blagojevich another $25,000 in 2003 at Rezko’s request, and that Blagojevich had thanked Ata and said that he knew he was considering a job with the administration and that it had better be a job where Ata could “make some money.” Ata testifies that Rezko also came to him while he was Chief of the IFA seeking $16 million to refinance his restaurant businesses, stating that he would get the Governor to approve it. Ata states that he did not support the plan. Ata testifies that Rezko promised him a job on the Capital Development Board, but that the position was given to someone else. He also states that Rezko became increasingly paranoid about being bugged by federal investigators. On cross-examination, the defense attempts to have Ata admit that Blagojevich himself never informed Ata that he was receiving a State post in exchange for his campaign contributions.

Monday, June 21, 2010: John Johnston, owner of the Maywood and Balmoral race tracks, testifies that Lon Monk came to see in December of 2008 and asked him for a contribution right before the Governor signed legislation extending subsidies for race tracks. E-mails are introduced indicating that former U.S. Representative and White House Chief of Staff Rahm Emanuel supported Blagojevich in 2006 in exchange for the State authorizing a $2 million grant for construction of athletic fields for the Academy for Urban School Leadership, a school in Emanuel’s district. Former Deputy Governor Bradley Tusk testifies that Emanuel contacted him when the grant money for the school was held up, and that Blagojevich’s advisors said that the Governor wanted Emanuel’s brother, a wealthy Hollywood agent, to hold a fundraiser for the Governor. Tusk requested that Emanuel write a letter to the Chicago Tribune in support of the Governor’s programs. He also testifies that he met frequently with Rezko and Kelly during his tenure as Deputy Governor, and that he signed checks for Blagojevich when the Governor was not present. John Harris, Blagojevich’s Chief of Staff, testifies that Blagojevich had stated to him that he wanted to run for President. Harris testifies that Blagojevich directed him to block two investment firms from getting any State business on the grounds that the firms had failed to hire the Governor’s wife, Patti Blagojevich. Harris also testifies that Blagojevich was interested in finding a State position for his wife, including on the Illinois Pollution Control Board.

Tuesday, June 22, 2010: Harris testifies that Blagojevich became increasingly worried about his finances, including his legal bills of approximately $1.7 million from the law firm of Winston & Strawn. Blagojevich paid his legal expenses from his campaign funds. Harris testifies that Blagojevich considered appointing Illinois Senate President Emil Jones, and even himself, to the U.S. Senate seat vacated by President Barack Obama. However, when Jones caused an ethics bill which Blagojevich opposed to pass the Senate, Blagojevich allegedly told Harris that there was no way Jones would get the seat. Harris testified that he had conversations with Blagojevich regarding “how much” he could get for the Senate seat, including from wealthy businessmen Blair Hull and J.B. Pritzker. Harris testified that he and General Counsel Bill Quinlan told Blagojevich not to consider such ideas. Harris testified that Rahm Emanuel telephoned him and told him that President Obama was interested in having Valerie Jarrett, former Chairman of the Chicago Transit Authority, appointed to fill the seat. The prosecution plays an audio recording of a conversation between Blagojevich and Harris regarding Emanuel’s suggestion of Jarrett. Blagojevich asks Harris on tape what he can get for appointing Jarrett, including a potential appointment as Secretary of the U.S. Department of Health and Human Services.
 

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On June 24, the United States Supreme Court rendered its decision in the case of former Enron executive Jeffrey Skilling. The majority in U.S. v. Skilling, No. 08-2349, in an opinion authored by Justice Ruth Bader Ginsberg (which may be read in its 114 page entirety here), held that the "honest services" mail fraud statute, 18 U.S.C. §1346, applies to bribery and kickback schemes, and not to mere "undisclosed self-dealing by a public official or private employee," alone. The majority held that Skilling did not violate §1346 since, although the Government charged Skilling with conspiring to de-fraud Enron’s shareholders by misrepresenting the company’s financial health and therefore profiting, the government never alleged that Skilling solicited or accepted any payments from third parties in exchange for making the misrepresentations.

The recent Skilling decision is already having an impact on federal prosecutions. As reported by Law.com, this week, Judge Ellen Segal Huvelle of the U.S. District Court for the District of Columbia told the parties in the prosecution of Kevin Ring, a former associate of convicted lobbyist Jack Abramoff, that the Court would grant Ring more time to file a motion for judgment of acquittal in light of Skilling. Ring was charged with bribery and tried last year, however the trial ended in a hung jury. The Court intentionally delayed Ring's retrial to await the Supreme Court's decision in Skilling and the cases of Black v. U.S. and Weyhrauch v. U.S. The prosecution has announced its intent to push forward with a second trial of Ring.

In Georgia news, attorney M. Dewey Bain, of Sugar Hill, Georgia, was sentenced to 5 years and 3 months imprisonment today in the U.S. District Court for the Northern District of Georgia for defrauding clients--including a 97 year-old woman--out of $4.3 million, as reported by the Atlanta Journal-Constitution. Bain entered into trust agreements with clients in which Bain falsely promised he would invest their monies in safe accounts, but instead fraudulently diverted the monies to his own personal use.

In Southeastern news, Snamprogetti Netherlands B.V.--yes, that Snamprogetti Netherlands B.V.--has agreed to pay $240 million in penalties to the government for alleged violations of the Foreign Corrupt Practices Act (FCPA) for allegedly bribing officials in Nigeria to obtain engineering, procurement and construction (EPC) contracts to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, according to an FBI press release. Snamprogetti is a Dutch corporation and a wholly owned subsidiary of Snamprogetti S.p.A., an Italian corporation. Snamprogetti was alleged, along with Kellogg Brown & Root Inc. (KBR), Technip S.A. (Technip), and a Japanese engineering and construction company to have engaged in a joint venture that was awarded four EPC contracts by Nigeria LNG Ltd. (NLNG), between 1995 and 2004 to build LNG facilities on Bonny Island. Snamprogetti allegedly caused the venture to hire two agents, Jeffrey Tesler and a Japanese trading company, to pay approximately $172 million in bribes to Nigerian officials. The deferred prosecution agreement was filed today in the U.S. District Court for the Southern District of Texas. Snamprogetti also reached a settlement of a related civil action by the SEC.

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According to Lyle Denniston at SCOTUSblog,  Ashby Jones at the Wall Street Journal Law Blog, and Professor Ellen S. Podgor of Stetson University College of Law and the White Collar Crime Prof Blog, the U.S. Supreme Court seemed more interested in the jury selection/fair trial issues in yesterday's oral arguments in the case of former Enron CEO Jeffrey Skilling, Skilling v. U.S., Case No. 08-1394 then it did in the constitutionality of 18 U.S.C. 1346, the federal honest services fraud statute. The transcript of the oral argument may be read here. After lengthy questioning regarding the jury selection at Skilling's trial by Justice Stephen G. Breyer and others, Chief Justice John G. Roberts, Jr., raised the question of honest services. Skilling's counsel, Sri Srinivasan, appeared to have adopted the strategy of arguing for a new trial based upon juror bias relating to the Enron scandal rather than a reversal of Skilling's convictions for honest services fraud. Srinivasan argued that the Department of Justice was interpreting the law broadly enough to reach virtually any falsehood told by an employee.

Deputy Solicitor General Michael R. Dreeben argued for the government. Dreeben argued ways in which the Court could interpret the honest services fraud statute in order to avoid holding it unconstitutionally vague. Justice Anthony Kennedy stated to Dreeben that it was Congress' job to rewrite the statute and Justice Antonin Scalia remarked on the excessive scope of the statute.

The Court's decision in the case is expected this spring or summer. The parties' arguments regarding honest services fraud largely mirrored the arguments in the two other challenges to 1346 which the Court had heard this term. Commentators have opined that 1346 may not survive without being sent to Congress for reshaping.

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As noted by Ashby Jones at the Wall Street Journal Law Blog, the U.S. Supreme Court will hear oral arguments in the case of U.S. v. Skilling on Monday at 1 p.m., Eastern Time. The central issue to be argued to the Court is whether the federal honest services fraud statute, 18 United States Code 1346, is "unconstitutionally vague." Mr. Jones rounds up commentary from around the blogosphere on the case.

As noted by Mr. Jones, the honest services fraud statute, Section 846, criminalizes the deprivation of another of the "intangible right to honest services." Congress enacted Section 846 22 years ago following the Supreme Court's decision in McNally v. U.S, which had ended prosecution for honest services as a part of mail or wire fraud. The problem is that Section 846 does not define "honest services." The honest services provision is a favorite of prosecutors, especially in cases where deprivation of money or property, as required in traditional mail or wire fraud cases, may be difficult to establish.

Jeff Skilling is the former Chief Executive Officer of Enron Corporation, which crashed into sudden bankruptcy in 2001. Skilling, former CEO Kenneth Lay and others were charged with conspiracy, wire fraud, making false statements to auditors and insider trading. In May of 2006, Skilling was tried in the U.S. District Court for the Southern District of Texas and the jury found him guilty on 19 counts. The District Court sentenced him to 292 months imprisonment and ordered him to pay $45 million in restitution.

Skilling appealed to the U.S. Court of Appeals for the Fifth Circuit, arguing that the government used an invalid theory of "honest services" fraud to convict him. The indictment alleged that Skilling conspired with others to, among other things, deprive Enron and its shareholders of the right to the honest services owed by its employees. The Fifth Circuit affirmed Skilling's honest services fraud conviction, noting that it had created an exception to the honest services fraud statute in the related Enron case of U.S. v. Brown, 459 F.3d 509 (5th Cir.2006) where an employer creates a goal, aligns employees' interests to achieve the goal and higher-level management sanction improper conduct to reach the goal. However, the Fifth Circuit held that Skilling's conduct had not been sanctioned by the corporation.

Skilling has appealed to the Supreme Court, arguing that lower rulings on the honest services fraud statute have been “a hodgepodge of oft-conflicting holdings, statements, and dicta” that “only the most discriminating lawyer or judge” could understand. Attorney Sri Srinivasan of O’Melveny & Myers will argue on Skilling's behalf before the Court.

Another case calling into question the constitutionality of Section 1346 is the case of newspaper magnate Conrad Black. The Court heard oral arguments in Black's case last December.

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Although it may be considered small change when compared with the fraud of fellow Floridian Scott Rothstein, according to an FBI press release, Gary Ernest Williams, former Chief Financial Officer for Marian Gardens Tree Farm (MGTF) in Groveland, Florida, was sentenced to eight years imprisonment on Monday in the U.S. District Corut for the Middle District of Florida. Williams was charged with embezzling approximately 10.5 million from MGTF since 2000 through falsified checks, use of a credit card in the company's name and making large cash withdrawals which he told bank officials were to be used to pay “employee bonuses.” Willams spent the money on lavish homes, luxury cars, jewelry, drugs, and vacations by private jet. He also failed to failed to pay federal income taxes in the amount of $3,675,000 on the illegally obtained funds.

Williams entered a guilty plea in July. The District Court ordered Williams to pay more than 14 million in restitution to MGFT and to forfeit homes in North Carolina, Pennsylvania and the Bahamas.

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In response to allegations uncomfortably similar to those against former New York celebrity lawyer and arch Ponzi-schemer Marc Dreier, Fort Lauderdale attorney Scott Rothstein, head of Rothstein, Rosenfeldt and Adler, P.A., appeared in response to a criminal information in the U.S. District Court for the Southern District of Florida on Tuesday. The information charges Rothstein with one count of Racketeering Conspiracy, in violation of 18 U.S.C. § 1962(d); one count of Money Laundering Conspiracy, in violation of 18 U.S.C. § 1956(h); one count of Mail and Wire Fraud Conspiracy, in violation of 18 U.S.C. § 1349; and two counts of Wire Fraud, in violation of 18 U.S.C. § 1343, as well as criminal forfeiture, U.S. v. Rothstein, 0:09-cr-60331-JIC.

According to the criminal information, available here, from about 2005 through November 2009, Rothstein, and other “known and unknown” unnamed co-conspirators, allegedly unlawfully obtained approximately $1.2 billion from investors through a Ponzi scheme (outdoing even Dreier’s scheme). The Government alleges that Rothstein used false statements, documents and computer records to induce investors to loan money to alleged borrowers based upon fraudulent and fictitious promissory notes and bridge loans. Rothstein allegedly falsely informed investors that his law firm, Rothstein, Rosenfeldt and Adler, P.A.’s, clients requested short-term financing for undisclosed business deals and that the clients were willing to pay high rates of return for loans negotiated by Rothstein.

Rothstein also allegedly told investors that they could purchase at a discount confidential settlement agreements in sexual harassment and whistleblower cases in amounts ranging from hundreds of thousands of dollars to millions of dollars. Rothstein allegedly falsely represented that the settlement agreements would be repaid to the investors at face value over time. Rothstein allegedly represented to investors that the settlements were highly confidential in order to protect the reputations of the companies and executives involved; that the plaintiffs preferred to settle the claims rather than purse them in a public forum; that Rothstein, Rosenfeldt and Adler, P.A., would disburse the investors’ funds to the plaintiffs; that the firm would make payments to the investors pursuant to the payment schedules in the alleged settlement agreements; that the funds were maintained in designated trust accounts for the investors in accordance with the rules and regulations of the Florida Bar and were verified by independent sources, as well as numerous other alleged false statements regarding the settlement agreements, investment funds and the firm.

To effect the fraud, Rothstein allegedly established numerous trust accounts in Rothstein, Rosenfeldt and Adler, P.A.’s name; falsified statements from financial institutions and manufactured online banking information allegedly showing investors’ monies; created false and fictitious settlement agreements and other documents. Among the alleged false and fictitious documents was a court order in a case, purportedly signed by a Federal District Judge, which falsely alleged that Rothstein, Rosenfeldt and Adler, P.A.’s clients had prevailed in a lawsuit and were owed $23 million, when in fact the firm had settled the case without the clients’ knowledge and had obligated them to pay $500,000 to the defendant.

The information also alleges that Rothstein allegedly falsely told clients that, in order to recover funds, they had to post bonds to be held in Rothstein, Rosenfeldt and Adler, P.A.’s trust account. Over several years, clients wired approximately $57 million to a trust account controlled by Rothstein. Rothstein allegedly created another false Federal court order to conceal the scheme, providing that the funds were to be returned to the clients by a later date.

Rothstein used the funds acquired through the alleged scheme to fund the operations of Rothstein, Rosenfeldt and Adler, P.A., and to expand the firm. The firm grew to employ approximately 70 attorneys. Rothstein is alleged to have laundered the funds from the scheme through corporations, contributions and large bonuses and gifts to employees. The information alleges that Rothstein used the funds to make contributions to Federal, State and local political candidates in a manner designed to conceal the source of the funds and to circumvent Federal and State limits on campaign contributions; for charitable donations; to purchase controlling interests in restaurants in South Florida; and to hire members of local law enforcement to provide security for Rothstein, Rosenfeldt and Adler, P.A., and for Rothstein personally.

The enormous wealth amassed by Rothstein through the alleged scheme is apparent in the Governement’s forfeiture allegations, which seek forfeiture not only of a sum of $1.2 billion, but also of 24 properties in Fort Lauderdale, Lauderdale by the Sea, Boca Raton, Hollywood and Plantation, Florida; New York City and Narragansett, Rhode Island, including Rothstein’s 10% ownership in the Miami Beach mansion of late fashion mogul Gianni Versace, “Casa Casuarina.” Forfeiture is also sought of numerous business interests, bank accounts and jewelry, as well as 24 vessels and vehicles purchased by Rothstein, including a 55 foot yacht.

The Government also lists millions in political and charitable contributions by Rothstein which it seeks forfeiture of, including contributions to the Republican Party of Florida; Florida Governor Charlie Crist; Democratic Chief Financial Officer Alex Sink, who is running for governor; and two hospitals.

As reported in the Miami Herald here, and here, Rothstein started Rothstein, Rosenfeldt and Adler, P.A., in 2002 as an obscure attorney practicing employment law. Over the next six years, his net worth grew from about $160,000 to tens of millions. Rothstein used flashy wealth and connections in the Broward County social and business communities to lure wealthy persons to invest in his schemes. He befriended the rich and famous, including NFL Hall of Famer Dan Marino

George G. Levin, a wealthy Fort Lauderdale resident and hedge fund manager, gave $656 million to Rothstein to invest in settlements purportedly worth $1.1 billion. Levin helped Rothstein market investments in employment and sexual harassment lawsuits to investors, although he is not alleged to have been complicit in Rothstein’s crimes. Another of Rothstein’s clients, car-dealership mogul Ed Morse, claims that Rothstein defrauded him of $57 million, arising from the settlement of a contract dispute with an interior decorator.

Rothstein would allegedly give large bonuses to employees of Rothstein, Rosenfeldt and Adler, P.A. on the condition that they make campaign contributions to political candidates who Rothstein would specify. The Government has stated that the recipients of the political contributions have returned the contributions. The Florida Democratic Party has returned $200,000 and the Florida Republican Party has given back $150,000. After Crist won the Governor’s race in 2006, he appointed Rothstein to a panel which nominates Broward County judicial candidates. The Florida Democratic Party has called for an investigation of Crist. Rothstein also allegedly paid gratuities to local law enforcement officers to avoid scrutiny.

Rothstein’s scheme began to unravel over Halloween weekend, when investors began calling the firm for overdue payments and discovered the fraud. Rothstein fled to Morocco in October, taking $400,000 to $500,000 in cash with him and wiring $16 million to Casablanca. Rothstein reportedly sent e-mails to members of his firm that he was contemplating suicide, but he returned to the U.S. on a private jet in early November. He met with Federal authorities and provided details regarding his Ponzi scheme. FBI and IRS agents raided Rothstein, Rosenfeldt and Adler, P.A.’s law offices, and seized Rothstein’s real and personal property. Rothstein agreed to waive indictment, an indication that he is cooperating with the Government, although Rothstein’s counsel has denied that he has any deal with the Government.

The Government’s information does not name Rothstein’s alleged co-conspirators, however news reports suggest members of Rothstein's inner circle at the law firm, and officers at Toronto Dominion Bank, where the investor trust accounts were held.

Rothstein’s alleged Ponzi scheme has been called the largest in the history of South Florida by Federal officials. The Florida Bar has disbarred Rothstein for stealing from the firm’s trust account. Rothstein, Levin and TD Bank are also being sued by a group of investors for more than $100 million.

Rothstein appeared in court on Tuesday in casual attire with a confident demeanor and pled not guilty to the information. U.S. Magistrate Judge Robin Rosenbaum ordered Rothstein jailed pending trial based on Rothstein’s flight to Morocco. Rothstein is represented by attorney Marc Nurik, oddly of Rothstein, Rosenfeldt and Adler, P.A. He faces up to 100 imprisonment if convicted.

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As reported by the New Orleans Times-Picayune, Judge T.S. Ellis, III, of the U.S. District Court for the Eastern District of Virginia read instructions to the jury yesterday which lasted over 2 & 1/2 hours, and the jury retired for its deliberations in the case against former U.S. Representative William Jefferson. The jury deliberated for about four hours and will re-convene to continue deliberations this morning.

The jury weighing the evidence in the six week long trial of Jefferson on 16 criminal counts, including racketeering, honest services fraud and violations of the Foreign Corrupt Practices Act, consists of two white males, six white females, two black males and two black females. Jefferson's case is the first time the Foreign Corrupt Practices Act has been applied to a public official. The Court sent three alternate jurors home yesterday, instructing them to remain "pristine" with regard to their exposure to information regarding the case.Jefferson's lead attorney, Robert Trout, told reporters that Jefferson intends to be present at Court each morning when the jury arrives.

Closing arguments were heard earlier in the week, with numerous media outlets and journalists from Louisiana in attendance.

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Sir Robert Allen Stanford is scheduled to be arraigned today on conspiracy, mail and wire fraud, money laundering and obstruction charges in Houston in the U.S. District Court for the Southern District of Texas. Stanford is represented by attorneys Dick DeGuerin and Sean Ryan Buckley, of the Houston firm of DeGuerin and Dickson.

According to the docket for the case, the Government obtained its 21-count indictment, which can be viewed here, last Thursday and promptly moved to seal (i.e. prevent public access to) it, and then unsealed it on Friday shortly before Stanford’s arrest.

The Court will likely revisit the issue of whether Stanford is entitled to release before trial. On Friday, the Court ordered co-defendants Mark Kuhrt and Gilberto Lopez released on a $100,000 unsecured bond. However, given Stanford’s considerable wealth and ties abroad, any amount of bond imposed in his case will undoubtedly be far higher, if Stanford is granted pre-trial release at all, that is. The U.S. District Court for the Eastern District of Virginia determined that Stanford posed a high risk of flight, and denied bond.

The case will be tried before U.S. District Judge David Hitter, a brief description of whom can be found here.

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The writers of Federal Criminal Defense Blog have been busy writing on other matter and apologize for the brief hiatus. Much has happened in the sphere of white collar crime even during our short absence, most notably developments in the two largest Ponzi schemes in U.S. history, and we have some catching up to do.

We’ll start with the second largest—an indictment indictment against billionaire Texas financier Sir Robert Allen Stanford, 59, was unsealed in the U.S. District Court for the Eastern District of Virginia on Friday according to the Associated Press  and the BBC. The 50-page indictment alleges that Stanford and six other defendants with allegedly perpetrated a $7 billion Ponzi-style fraud. It charges Stanford and the other defendants with 21 counts, including 7 counts of wire fraud, 10 counts of mail fraud, conspiracy to obstruct an investigation for the Securities and Exchange Commission, obstruction of an investigation by the SEC and conspiracy to commit money laundering. Defendants Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are executives of Stanford Financial Group. Defendant Leroy King, a former bank regulator for the Caribbean island nation of Antigua and Barbuda, allegedly accepted more than $100,000 in bribes from the other defendants in order to allow the alleged scheme to continue.

The indictment alleges that the defendants sold certificates of deposit issued by Stanford International Bank, based in Antigua, to investors, promising large returns. The defendants allegedly made false claims to investors regarding the growth of Stanford Financial Group’s assets.

The scheme had approximately 30,000 investors. Stanford is alleged to have diverted more than $1.6 billion in investment funds in personal loans to himself. More than $1 billion in investment money is allegedly unaccounted for. Stanford is also charged in the indictment with allegedly conspiring to obstruct an SEC proceeding. Stanford Financial Group’s finance chief, James M. Davis, is cooperating with investigators. Davis has been charged with fraud and obstruction in a separate indictment.

Stanford was the owner of a newspaper, two restaurants, and a development company in Antigua, and was a cricket enthusiast and owner of the Stanford cricket grounds in Antigua. In 2008, Stanford staged a $20 million, winner-takes-all, match between a West Indian XI and England at the grounds. In 2006, Stanford became the first American to be knighted by Antigua and Barbuda.

Stanford is represented by attorney Dick DeGuerin, who has issued a statement to the press that Stanford is innocent of the charges. Stanford has made repeated statements as to his innocence and has alleged that no money was lost.

Stanford surrendered to the FBI on Thursday and had his initial appearance on Friday. U.S. Magistrate Judge Hannah Lauck determined that Stanford posed a flight risk and ordered him to remain in custody pending a future detention hearing in Houston. Several governments have frozen his assets. Stanford faces as much as 250 years in prison if convicted.

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By way of background, the Government originally charged Syed Haris Ahmed in a sealed indictment filed on March 23, 2006. The Government obtained a Superseding Indictment on July 19, 2006. It has charged Ahmed and his co-defendant, Ehsanul Islam Sadequee, with one count of conspiracy to provide material support to terrorists, in violation of Title 18 United States Code Sections 956 and 2332b; one count of providing and attempting to provide material support to terrorists, in violation of Title 18, Sections 956, 2332b and 2339A; one count of conspiracy to provide material support to a Designated Foreign Terrorist Organization, in violation of Title 18, Section 2339B; and one count of attempting to provide material support to a Designated Foreign Terrorist Organization, in violation of Title 18, Section 2339B.

The Government’s Superseding Indictment contains the following facts and allegations:

Ahmed was born in Pakistan in 1984 and became a naturalized U.S. citizen. Sadequee, who is allegedly nicknamed “Shifa,” was born in Virginia in 1986, and is of Bangladeshi descent.

In or around late 2004, Ahmed and Sadequee and another person engaged in alleged paramilitary training, including with paintball guns, in Northwest Georgia.

On or about February 26, 2005, Ahmed and Sadequee traveled to Toronto, Canada, by bus. While in Toronto, Ahmed and Sadequee allegedly met in person with “supporters of violent jihad” and “discussed strategic locations in the United States that were suitable for terrorist attack, including military bases and oil storage facilities and refineries.” Ahmed, Sadequee and the others allegedly also “explored how they might disrupt the world-wide Global Positioning System (GPS)” and “a plan for members of the group to travel to Pakistan to seek and receive paramilitary training that they would then use to engage in violent jihad.”

After returning to Atlanta, in or about March or April 2005, Ahmed and Sadequee further discussed these plans, and also the possibility of attacking Dobbins Air Reserve Base in Marietta, Georgia.

At or around this time, Sadequee was allegedly in communication with Younis Tsouli, an unindicted co-conspirator in the United Kingdom.

On or about April 10 and 11, 2005, Ahmed and Sadequee traveled to Washington, D.C., in Ahmed’s pickup truck. On April 11, Ahmed and Sadequee allegedly “made short digital video recordings… of symbolic and infrastructure targets of potential terrorist attacks in the Washington, D.C., area, including the United States Capitol; the headquarters building of the World Bank…; the Masonic Temple in Alexandria, Virginia; and a group of large fuel storage tanks near I-95 in northern Virginia.”

On returning to Atlanta, Ahmed allegedly gave the video clips to Sadequee so that he could send the clips to supporters of violent jihad abroad. Sadequee allegedly sent the video clips to Tsouli in the United Kingdom and Tsouli stored the clips on his computer along with other materials relating to violent jihad.

Between March and July 2005, Sadequee allegedly provided Ahmed with the contact information for Abu Umar, an unindicted co-conspirator, and told Ahmed that Abu Umar could assist Ahmed with obtaining paramilitary training in Pakistan. On or about July 17, 2005, Ahmed traveled from Atlanta to Pakistan for the alleged purpose of studying in a madrassa and then obtaining paramilitary training to engage in violent jihad in Kashmir or other locations, including the U.S. Ahmed is alleged to have intended to join Lashkar-e-Tayyiba (“Army of the Righteous”). Ahmed was allegedly unsuccessful in his attempts to enter a madrassa or to obtain paramilitary training, and returned to Atlanta.

On or about August 18, 2005, Sadequee traveled from Atlanta to Bangladesh to allegedly get married and to pursue violent jihad. Sadequee was stopped as he traveled through John F. Kennedy Airport in New York and was discovered to allegedly have two compact discs concealed in the lining of his suitcase which contained a Fairfax County, Virginia, Visitor’s Center map of the Washington area, including the sites of four potential terrorist targets which Sadequee and Ahmed had videotaped in April 2005. Sadequee was interviewed by federal agents and allegedly falsely stated that he had traveled to Toronto alone.

On or about August 19, 2005, Ahmed returned to Atlanta from Pakistan and was interviewed by federal agents at Hartsfield International Airport in Atlanta. Ahmed allegedly made false and misleading statements about his travel to Canada and Pakistan, allegedly stating that he had made the trips to visit friends and family and to attend a religious school.

In the Fall of 2005, Ahmed allegedly researched shaped explosive charges and methods to defeat surveillance by government authorities. He also allegedly cautioned an individual to avoid discussing certain topics over the telephone.

On or about November 27, 2005, Ahmed allegedly told a supporter of violent jihad of his intent to go abroad again to train for, and engage in, violent jihad, and told the individual to read the indictment against Jose Padilla. At or around this time, Ahmed allegedly reviewed a periodical for gun enthusiasts.

In early 2006, Ahmed allegedly engaged in efforts to detect and evade suspected government surveillance. In March of 2006, agents from the FBI Joint Terrorism Task Force engaged in a series of interviews with Ahmed, in which Ahmed allegedly attempted to conceal the true nature of his, Sadequee’s and their alleged co-conspirators’ discussions, activities and plans. After the interviews began, Ahmed communicated with Sadequee in Bangladesh and warned him about the FBI’s interest in their activities.

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The trial of Syed Haris Ahmed is Georgia’s most significant terrorism case and we will collect for readers daily information on the trial and additional information. Today’s information on the Ahmed/Sadequee Trial comes from the Atlanta Journal-Constitution, WSBTV and CNN.

Ahmed is 24, an Atlanta area native and a former student at Georgia Tech. Ahmed waived his right to jury trial, and his case is being tried before District Court Judge William S. Duffey in the U.S. District Court for the Northern District of Georgia without a jury. Jack Martin, of Martin Brothers, P.C., is representing Ahmed. Assistant U.S. Attorney Robert McBurney is representing the United States. Ahmed’s co-defendant, Ehsanul Islam Sadequee, will be tried in August. Stephanie Kearns of the Federal Defender Program is representing Sadequee.

On Monday, Mr. Martin gave his opening statements to the Court, describing Ahmed as a confused, frustrated and immature young man who “fell prey” to websites espousing extremist views. Mr. Martin characterized the alleged plans for terrorist acts as “passing random thoughts, momentary ideas, childish fantasies, unformed, inchoate notions.” Mr. Martin argued that Ahmed had the ability to commit the alleged acts but said “No.” He stated that Ahmed’s idea of paramilitary training was shooting paintball guns with a friend in the North Georgia woods.

Mr. McBurney argued that Ahmed “one step removed from the bomb throwers” and intended to wage violent jihad. Mr. McBurney argued that Ahmed was a would-be terrorist who went to Pakistan to join the Taliban. He said that the videos made by Ahmed while allegedly “casing” locations in Washington, D.C., including the Capitol and the Pentagon, were intended to prove to terrorists overseas that Ahmed had access to Washington’s “backyard” and could get in close to targets. McBurney said the government’s case is about supporting terrorism and not actually “pulling the trigger or dropping the bomb.”

FBI Special Agent Mark Richards testified for the government. During Agent Richard’s testimony, the government showed some of the videos. In one video of the World Bank Building, Ahmed bobbed up and down so much that Mr. Martin asked Special Agent Richards “If a terrorist was attacking on a pogo stick, this might be useful, right?” However, another video shows Ahmed and Sadequee driving past the Pentagon with Sadequee stating “This is where our brothers attacked.”

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